We started a church but, we do not know how to go about getting tax exemption for those who wish to donate to it. We do not wish to be 501(c)3 if at all possible because we do not want to be dictated to by the state. I have read some say you have to be 501 (c)3 others say you do not. I am confused.
Mark Rushdoony's Response: RE: The IRS and Tax Exemption for churches
One of the things to remember is that tax exemption is not to be considered a privilege granted by the state but a right that belongs to the church by nature of its status as an independent realm of authority. If the United States tried to tax Canadian citizens or organizations, it would involve a claim of jurisdiction, of legitimate authority. We would expect Canadians to refuse to pay taxes to the U.S. because the claim of jurisdiction is invalid. Likewise we must refuse all claims to state jurisdiction over the church. The taxing of a church is a claim to sovereignty over both the church and its head, Jesus Christ. To tax the church is to steal the property of Jesus Christ, and to yield up to such a tax would be to surrender what is not ours to give.
The exemption of the church from taxation is an ancient victory of Christendom that long preceded the Constitution and Bill of Rights. This is why freedom of religion is mentioned in Article I but not tax exemption. It was simply not an issue by that time. But history is no better taught in the halls of government than it is in government schools. I'll quote from the Tax Guide for Churches and Religious Organizations, which is posted on the IRS website:
Congress has enacted special tax laws applicable to churches, religious organizations, and ministers in recognition of their unique status in American society and of their rights guaranteed by the First Amendment of the Constitution of the United States. Churches and religious organizations are generally exempt from income tax and receive other favorable treatment under the tax law ...
This statement is factually true but implies that the tax exemption is the result of a special privilege granted to churches because they do nice things. In recognition of such, churches get "favorable treatment." This is not true, of course, but too few churchmen know the implications of the difference between a privilege and a right.
A church is exempt by nature of the fact that it is a church. If you organize and meet as a church you are recognized as a church. The same publication says,
Automatic Exemption for Churches
Churches that meet the requirements of IRC section 501(c)(3) are automatically considered tax exempt and are not required to apply for and obtain recognition of tax-exempt status from the IRS.
Notice that it says churches are "automatically considered tax exempt" and there is no need to apply for it.
The IRS does not nor should it have rules on what constitutes a church. This has led to abuse of church tax exemption (such as mail-order ministerial licenses), but the alternative to some abuse is for the government to rule on the legitimacy of a church, and that would, God forbid, involve a government accreditation of churches.
While the IRS says it does not define a church, it has guidelines for what it considers parameters to be considered tax deductible. Notice the above statement says only "Churches that meet the requirements of IRC section 501(c)(3) are automatically considered tax exempt." Its guidelines for a tax-exempt organization are listed:
Churches and religious organizations, like many other charitable organizations, qualify for exemption from federal income tax under IRC section 501(c)(3) and are generally eligible to receive tax-deductible contributions.
To qualify for tax-exempt status, such an organization must meet the following requirements (covered in greater detail throughout this publication):
■ the organization must be organized and operated exclusively for religious, educational, scientific, or other charitable purposes,
■ net earnings may not inure to the benefit of any private individual or shareholder,
■ no substantial part of its activity may be attempting to influence legislation,
■ the organization may not intervene in political campaigns, and
■ the organization's purposes and activities may not be illegal or violate fundamental public policy.
It is important to note what the IRS says here. In its view, all tax exempt organizations must meet these criteria. Those churches that are "automatically considered tax exempt" and those churches that apply for and receive 501(c)(3) status are all held up to these same standards. The difference, the IRS claims, is that churches do not have to apply for tax exemption. (Other, non-church "religious organizations" are not automatically recognized as tax exempt.) This is important. Those who oppose 501(c)(3) status for churches often state these rules (particularly those that regard legislation and politics) as the reason, not realizing that the IRS has long held all churches to these standards, regardless of whether they have "automatic" or granted exemption. I do not think churches should apply for what is theirs any more than I think we should register guns. My only point is that the claim that applying for tax exemption gives you a different set of rules is not correct. The IRS holds any and all churches to these same rules.
There is good news on the onerous portions of the rules against political campaigning. In 2009, a court ruling said the IRS had to clarify which officials had the right to authorize audits of churches. To date, the IRS has not done so, and there have been no such audits since then, though the IRS has not officially said this has been a deliberate action. In reality these rules were always more threat than anything else. Can you name one church shut down for politicking? If it was, it could reorganize the next day under a different name and conduct its affairs unmolested. The threat against church involvement in politics is meant to be just that, a threat, an act of intimidation. Those churches that fear the wrath of the IRS do not fear the wrath of God.
So why would churches submit to IRS approval? The IRS recommends it as a voluntary act:
Although there is no requirement to do so, many churches seek recognition of tax-exempt status from the IRS because such recognition assures church leaders, members, and contributors that the church is recognized as exempt and qualifies for related tax benefits. For example, contributors to a church that has been recognized as tax exempt would know that their contributions generally are tax-deductible.
Note that applying for IRS recognition of tax exemption really only serves to reassure donors that the IRS will not question their contributions when itemized on a tax return. The granting of 501(c)(3) status does not grant anything the church does not already possess by right. If tithes and offerings depend on a wink and a pat on the back from the IRS, a church needs sound teaching more than anything else.
Occasionally people will write me a note that Chalcedon's 501(c)(3) status means we are obviously hopelessly compromised. Chalcedon, however, is not a church; it is a "religious organization." I do pastor a small local church, but take no salary and our offering goes directly into a Chalcedon deacon's fund. Thus, the church has no income or expenses. My experience as to legal expectations is thus limited by my unique situation. I believe any bank will require a tax ID number as a requirement for opening a checking account. This does not mean you are liable for taxes. It means there are identifiable individuals who have fiduciary accountability. For such things, you should talk to a local knowledgeable CPA.
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